More venture capital flows to Israeli cos

According to IVC, Israeli high-tech companies raised $918 million in January to September this year, up 8% on 2009.

Ninety-six Israeli high-tech companies raised $341 million from venture capital funds and other venture investors both local and foreign in the third quarter of 2010. The amount raised was similar to the $343 million raised by 104 companies in the previous quarter, and 13% above the $303 million raised by 108 companies in the third quarter of 2009.

In the first three quarters of 2010, Israeli high-tech companies raised a total of $918 million, 8% more than the $847 million raised in the corresponding period of 2009.

The figures are part of the findings of the latest IVC Quarterly Survey, conducted by the IVC Research Center. The survey is based on reports from 104 investors, of which 49 are Israeli management companies and 55 are other including foreign investment entities.

The survey found that, in the third quarter of 2010, the average financing round was $3.55 million, compared with $3.3 million in the second quarter, and $2.8 million in the third quarter of 2009.

The data suggest a slow recovery in the local high-tech sectors ability to raise capital. The third quarter was similar to the previous quarter in terms of capital raised by high-tech companies, and essentially better than what we have seen over the past two years, says IVC Research Center CEO Koby Simana. However, capital raising for Israeli VC funds has been frozen for quite a while, and therefore we expect further difficulties in future venture capital raising by high-tech companies.

Fifty-seven companies attracted more than $1 million each. Of these, two companies raised more than $20 million each, eight companies raised $10 million to $20 million each and 13 companies raised $5 million to $10 million each.

As far as activity by Israeli venture capital funds is concerned, in the third quarter of 2010, the local funds invested $109 million in Israeli companies, 20% more than the $91 million invested in the second quarter, and 22% more than the $89 million invested in the third quarter of 2009. In the first three quarters of 2010, Israeli VC funds invested $278 million in Israeli companies, representing a decrease of 10% from the $308 million invested in the corresponding period of 2009.

The Israeli VC share of the total amount invested in Israeli high-tech was 32% in the third quarter, with the remainder of the capital coming from foreign investors as well as non-VC Israeli investors. In the first three quarters of 2010, the Israeli VC fund share was 30%, compared with 36% in the corresponding period of 2009.

The average first investment by Israeli VC funds in the third quarter of 2010 was $1.94 million, while the average follow-on investment was $1.04 million.

Israeli VC funds invested $20 million in foreign companies during the third quarter of 2010, compared with $12 million in the second quarter, and $18 million in the third quarter of 2009. Three out of 11 foreign transactions were first investments.

The communications sector led capital raising in the third quarter of 2010, with $97 million, or 28% percent of capital raised, followed by the software sector, with $57 million, or 17%, and life sciences, with $54 million, or 16%.

In the first three quarters of 2010, life science companies attracted $249 million, or 27% of total capital raised, which compares with $210 million, or 25% in the first three quarters of 2009. The communications sector followed with $189 million (21%), and Internet was next with $151 million (16%).

As for investment by stage, nine seed companies attracted $3 million, 1% of the total amount raised in the third quarter of 2010, compared with $15 million raised by 17 seed companies in the previous quarter, and $14 million raised by 16 companies in the third quarter of 2009. Early stage (R&D) companies captured 32% of total capital raised, while mid-stage companies (up to $10 million in revenue) attracted 48% of total capital raised.

During the first three quarters of the year, seed companies attracted $29 million, 3% of the total funds raised, compared with $52 million, or 6% in the first three quarters of 2009. Early stage companies accounted for 33% percent, mid-stage companies 48%, and late stage companies 16%.

Published by Globes [online], Israel business news - www.globes-online.com - on October 14, 2010

Copyright of Globes Publisher Itonut (1983) Ltd. 2010

 
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